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College savings - 529? other options?

JHunzJHunz Registered User regular
edited December 2010 in Help / Advice Forum
So the wife and I are trying to figure out what sorts of options are available for saving for the future of our new family member.

We seem to have three options for Illinois 529 plans - two of them being stock-market fund type plans, and one being more of an amortized payment sort of thing.

The disadvantage on the amortized (College Illinois) plan is obvious: there's no payment flexibility. No prepayment penalty, but not really any option to start paying a lesser amount in and pay more later.

The problem with the stock market funds is that my wife tends to be very financially conservative - in that she doesn't really trust the stock market at all, and would take it badly if our college fund started losing money one year because some asshole bankers caused and collapsed another bubble. Also, there are some annual % fees on the accounts which would decrease the yield some.

Are there other things we should be looking at? Are there other tax-deductible ways to save for future education expenses, or are 529s it? Do we need to just get over it and put the money into the stock market?

JHunz on
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Posts

  • ImprovoloneImprovolone Registered User regular
    edited December 2010
    I forget the type off the top of my head, but we set up an account for my son that has some awesome benefits for money removed from it and used for educational purposes. Also, the stock market over 18 year or so is a pretty good bet.

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  • KakodaimonosKakodaimonos Registered User regular
    edited December 2010
    529 plans are a lot like other savings or retirement plans. You should have an assortment of various fund choices from standard stock plans to bond or money market funds. IF YOU DO A SAVINGS PLAN, YOU DO NOT HAVE TO USE THE ILLINOIS 529. The residency requirement is ONLY for the prepaid tuition plans. So find the state 529 plan that has the best yield/expense ratio and selection of funds if you want to use the savings plan.

    This is from a year ago, but Morningstar pulled together the best & worst 529 plans.
    Best and Worst 529 Savings Plans

    Stock or higher risk investment options in the initial phases and as you get closer to maturity, either retirement or high-school graduation, you move the money into safer investments, like bonds and money-market funds. As you're a year or two away from your child's graduation, most of the money in the 529 plan should probably be in a low-yield, safe investment.

  • WezoinWezoin Registered User regular
    edited December 2010
    I don't know if there is one along these lines available to you or not - but in Canada we have an education savings plans where the government either adds twice or three times (I can't remember which it is, but my parents set up a small one for me when I was young) as much as the parents put in, and as long as you can prove its used for education (basically, show them a tuition/books/laptop/rent bill) theres no fees or anything. I believe after adding the money it is then invested in the stock market, but I'm not sure.

    Basically, look for something where the government will match or more than match what you put in before its invested. While 18 years in the stock market will probably do good things to your savings, the more you start with the better it will turn out.

  • a5ehrena5ehren AtlantaRegistered User regular
    edited December 2010
    Wezoin wrote: »
    I don't know if there is one along these lines available to you or not - but in Canada we have an education savings plans where the government either adds twice or three times (I can't remember which it is, but my parents set up a small one for me when I was young) as much as the parents put in, and as long as you can prove its used for education (basically, show them a tuition/books/laptop/rent bill) theres no fees or anything. I believe after adding the money it is then invested in the stock market, but I'm not sure.

    Basically, look for something where the government will match or more than match what you put in before its invested. While 18 years in the stock market will probably do good things to your savings, the more you start with the better it will turn out.

    The US doesn't have any 529 plans (or any gov't-sponsored plans outside of certain retirement plans for gov't employees) with matching funds that I know of. Usually your state government will give you a tax deduction or credit if you invest in one of their plans, but the only break from the Feds is that that any profits made on the 529 plan are not subject to capital gains and income taxes if used for educational purposes.

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